As you know, Kota Fibers has been growing its sales consistently in the 15-20% range annually for the last 3 years and the 2001 forecasts are showing 20% growth. Despite these robust sales figures, net income is forecasted to be only $1.3 Million, almost half of 2000 Net Income despite the forecasted incremental increase in sales of $15 million. In addition, the Company is facing a cash crunch and the Company’s banker, the All-India bank and Trust Company are very nervous because they see their loan position with your Company being extended and Kota has failed to repay the loan as per the contract. This is a serious issue and needs to be addressed immediately.

I have reviewed the Company’s projections and cash flows for the fiscal year ended December 31, 2001 in an attempt to identify: a) the operational issues and opportunities presented by various departments and b) the integrity of the data within the forecasts and cash flows. I have done so with the intent of providing your Company with a more accurate fiscal picture for 2001 and to determine if the Company can meet its fiscal obligations to the bank and other key creditors. The following report is a summary of my findings. Please also refer to Appendix 1 which is a numerical summary of my findings. The excel spreadsheet from which it was derived has been attached to this report for your review. Please note that the Summary has been color coded and referenced in order to assist you in understanding the data and that notes to my file are included on Appendix 2. Note that the summary is a build-up of assumptions/decisions made and should be viewed as a progressive iteration. For example, we start with the assumptions changed to the base model, then we factor in the inventory adjustments, then we factor in Pondicherry sales decisions including any other adjustments made.

Overextended credit and interest rates at 14.5% with a fear of going higher

Prior to making any other decision, it appears that the Company is being very aggressive with its capital purchase requirements, its dividend payable policy and the policy to maintain a large cash on hand balance. These decisions, before anything else are having a serious impact on the loan requirements needed from All India Bank to support operational and financing decisions being made. As such, I have provided adjustments to the assumptions affected (cash on hand, dividends payable and capital expenditures) so that we can analyze the impact of these decisions prior to reviewing any initiatives with regards to inventories and extending credit to new customers to obtain large sales increases.

Inventory and Note Payable Buildup

There have been issues in the past and in the forecast with regards to a large buildup of inventory to accommodate the growth in sales, the long lead times and the seasonality of the production/selling cycle. I understand that we have received a memo from R. Sikh, the transportation manager, that due to improved reliability from our suppliers, Kota can reduce its purchasing lead times from 60 to 30 days. In addition, we have also received word from R. Mohan that we can further reduce lead times on purchases of pellets from 60 days to 30 days to essentially 2-3 days. These pellet purchases represent 35% of our overall raw materials purchases.

The cash flow and forecast you are looking at has not yet taken into account these effects. I have taken these effects into consideration when analyzing the data. By reducing purchase lead times from 60 to 30 days on 65% of our purchases and from reducing the other 35% of our purchases from 60 to 2-3 days, we can reduce inventory levels throughout the year and by over $1.7 Million from the base model.

Data Integrity Issues in the forecast and cash flow

After careful review of the supplied spreadsheets I have uncovered the following...

YOU MAY ALSO FIND THESE DOCUMENTS HELPFUL

...Feasibility studies about Coco fiber used in making Bricks
CHAPTER 1:
THE PROBLEM AND ITS BACKGROUND
Background of the Study
The coconut palm, Cocos nucifera, is a member of the family Arecaceae (palm family). It is the only accepted species in the genus Cocos. In this research we use Coconut coir to make bricks. Coconut Coir is a natural fiber extracted from the husk of coconut. Technically, coir is the fibrous material found between...

...Management: Kota Fibres, Ltd.
Kota Fibres, Ltd. was founded in 1962 in Kota, India. Created to produce nylon Fibre, Kota Fibres provided synthetic Fibre yarns to local textile weavers mainly to make the traditional women’s dress in India; the saris. Ms. Pundir was both the managing director and principal owner of the company. Kota Fibres used new technology and domestic raw materials to produce their quality product. The...

...Importance of fiber length and maturity in short staple spinning
General - Technology of Short-staple Spinning : "Technology of Short-staple Spinning" deals with the basics, and therefore generally valid, technological relationships in short-staple spinning. The following chapters will be organized according to machines or machine groups. Generally valid basic principles will thus be kept separate from ongoing developments in machine design and construction.
Introduction...

...Page 3
Financial Analysis…………………………………Page 4
Recommendation and Conclusion…………..……Page 4
Executive Summary
Kota Fibres is a single nylon manufacturing plant in Kota India managed and owed by Ms. Pundir. The company produces synthetic fiber yarns that are used to make colorful cloth used in creating saris. The need for saris’ is very seasonal and as such the demand for synthetic fibers mirrors this seasonality. Because of these peak...

...North America Dietary Fibers Market Worth
$1321.2 Million by 2018
The North American region accounts for the largest share, both in terms of value as well as volume, in
the global market for dietary fibers. The region continues to hold that position due to its flourishing enduser industries. The North American region has been totally driven by the U.S. market, especially by the
insoluble and conventional dietary fibers. The market was initially...

...cloth. Good portions of these are combinations of synthetic fibers woven or threaded together to make a final product. These synthetic fibers are a large group of polymers. Synthetic polymers offer more possibilities, since they can be designed with molecular structures that impart properties for desired end uses. All fibers are ploy-something or polymers. That means they are long strings of repeating chemical elements. Some fibers...

...ANIMAL FIBER
Animal fibers are largely those which cover mammals such as sheep, goats and rabbits with well-known examples such as alpaca, merino, wool, fur and mohair.
Animal fibers are natural fibers that consist largely of particular proteins. Instances are silk, hair/fur (including wool) and feathers. The animal fibers used most commonly both in the manufacturing world as well as by the hand spinners are...